In the drive to clamp down on tax avoidance, HMRC has issued a somewhat confusing leaflet aimed at the public entitled ‘Tempted by Tax Avoidance?’ report Harris & Co Chartered Accountants Northampton, who are specialist small business accountants.
It is supposed to help identify the tell-tale signs of avoidance schemes and warn of the potential negative risks of signing up to a so-called aggressive tax scheme.
HMRC say in the leaflet that ‘if you use a scheme which relies on concealment, pretence, non-disclosure or misrepresentation of the true facts, you are breaking the law by evading tax’.
Despite attempts to clarify the distinction between evasion and avoidance, the leaflet uses the term interchangeably, potentially leading to confusion.
The leaflet lists warning signs that taxpayers should look out for before entering into any scheme. These include ‘when a scheme sounds too good to be true’ and cannot have been intended by parliament, when tax benefits or returns are disproportionate to investment risk, and when the scheme involves very complex arrangements given what it is meant to achieve.
Schemes that involve round-tripping, tax havens or banking secrecy countries, and secrecy or confidentiality agreements, should also raise alarm bells.
In addition, the leaflet warns that just because a scheme has been granted a scheme reference number (SRN) under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, it does not mean that HMRC has approved the scheme or that it can be relied upon.
A scheme with an SRN merely means that the promoter has complied with his legal obligations to tell HMRC about an avoidance scheme.
The leaflet also includes real life examples of avoidance schemes and is available from HMRC at HERE